What is a Colorado Land Trust? If you are looking for a conservation type land trust, you are in the wrong place. If you are looking for a title-holding, “Illinois type” land trust, you’ve hit the right page!
A land trust is a revocable, living trust used specifically for holding title to real estate. The trustee is a person with a different last name than the beneficiary for maximum privacy. Since the land trust document creating the trust is not recorded, nobody but the trustee and beneficiary know who the beneficiary (real owner) is. If you have many properties and want to keep your name off public records away from government inspectors, code enforcement, ex spouses, tenants and lawyer, a Colorado land trust may be for you.
Land trusts can protect you from liens filed against your name, because the property is titled not in your name but in a trust. Also, if you own property in a homeowner’s association with a trust, you are not personally liable for the unpaid HOA dues and assessments, but rather the trust (which only owns one property) is liable. Furthermore, if you sell a property from a land trust and end up with a title claim, the claim will be against the trust, not you personally. As you can see, there are many benefits to holding real estate in a Colorado land trust.
For more information on setting up a Colorado land trust, visit our main site at www.bronchicklaw.com or call us at 303-398-7032.
Many people wonder what’s the differences are of a land trust versus living trust.
A “living trust”, by definition, is a trust created while you are alive. Living trusts can be revocable (changeable or amendable) or irrevocable. When using a living, revocable trust for avoiding probate, this popular type of trust is often referred to as a \”living trust\”. A living trust vests legal title in a trustee, equitable title remaining in the beneficiary. The trustee has broad powers to manage the trust property as he sees fit for the benefit of the beneficiary.
A land trust is also a revocable, living trust, but it vests both equitable AND legal title in the trustee, leaving a \”personal property\” interest in the beneficiary. What does this mean? Basically that the beneficiary can transfer his interest in the trust like a shareholder in a corporation, without affecting title to the property. This makes transfers of ownership very simple, and not recorded on public records. In some states, this may avoid transfer tax normally due on the transfer of ownership of the property.
Also, the trustee in a land trust is not authorized to anything except that which the beneficiary directs him to do (called a \”power of direction\”, which is vested in the beneficiary).
While similar, a land trust agreement is drafted dramatically different than a typical living trust.
Using land trusts in Colorado is very powerful for the savvy real estate investor. A land trust is a revocable, living trust used specifically for holding title to real estate. Each property is titled in a separate trust, affording maximum privacy and protection. Also known as an “Illinois Land Trust”, the title-holding land trust is recognized by statute in Florida, Georgia, Hawaii, Illinois, Indiana, Montana, North Dakota, South Dakota, and Virginia.
Colorado does not have a land trust statute, but since a land trust is a basic revocable, living trust, it would be recognized under common law trust principles .
Here are seven good reasons to use land trust for titling property to real estate in Colorado.
1. Privacy. In today’s information age, anyone with an internet connection can look up your ownership of real estate. Privacy is extremely important to most people who don’t want others knowing what they own. For example, if you own several properties within a city that has strict code enforcement, you could end up being hauled into court for too many violations, even minor ones. Having your real estate titled in land trusts makes it difficult for city code enforcement to find who the owner is, since the trust agreement is not public record for everyone to see.
2. Protection from liens. Real estate titled in a trust name is not subject to liens against the beneficiary of the trust. For example, if you are dealing with a seller in foreclosure, a judgment holder or the IRS can file a claim against the property in the name of the seller. If the property is titled into trust, the personal judgments or liens of the seller will not attach to the property. This is because of the unique nature of land trusts, which make the beneficiary’s interest in the trust “personal property”, and vests all legal and equitable title in the trustee. Thus, a judgment against X is not a lien on the property held in a land trust for X.
3. Protection from title claims. If you sign a warranty deed in your own name, you are subject to potential title claims against you if there is a problem with title to the property. For example, a lien filed without your knowledge could result in liability against you, even if you purchased title insurance. A land trust in your place as seller will protect you personally against many types of title claims because the claim will be limited to the trust. If the trust already sold the property, it has no assets and thus limits your exposure to title claims.
4. Discouraging Litigation. Let’s face it, people tend to only sue others who appear to have money. Attorneys who work on contingency are only likely to take cases which they can not only win, but collect, since their fee is based on collection. If your properties are hard to find, you will appear “broke” and less worth suing. Even if a potential plaintiff thinks you have assets, the difficult prospect of finding and attaching these assets will discourage litigation against you.
5. Protection from HOA Claims. When you take title to a property in a homeowner’s association (HOA), you become personally liable for all dues and assessments. This means if you buy a condo in your own name and the association asseses an amount due, they can place a lien on the property and/or sue you PERSONALLY for the obligation! Don’t take title in your name in an HOA, but instead take title in a land trust so that the trust itself (and thus the property) will be the sole recourse for the homeowner’s association’s debts.
6. Making contracts assignable. The ownership of a land trust (called the “beneficial interest”) is assignable, similar to the way stock in a corporation is assignable. Once property is title in trust, the beneficiary of the trust can be changed without changing title to the property. This can be very advantageous in the case of a real estate contract that is non-assignable, such as in the case of a bank-owned or HUD property. Instead of making your offer in your own name, make the offer in the name of a land trust, then assign your interest in the land trust to a third party.
7. Colorado’s Unique Trust Statute. In most states, a property in trust must be held in the name of the trustee, for example, “John Jones, as trustee under a declaration of trust dated June 2, 2011″. Colorado law (CRS C.R.S. 38-30-108.5) allows a trust to take title in its name, then the trustee may file a “statement of authority” identifying the trustee (CRS 38-30-172). If you want to change trustees in Colorado, you do not need a new deed, just amend the land trust and file a new statement of authority with the County Clerk and Recorder.
As you can see, the title-holding land trust can be very beneficial for the owner of real estate in Colorado.